Oil/Gas/owner interest

Is the "decimal interest" shown on a division order the same number as the "owner interest" as shown on a tax appraisal?

If the "owner interest" for 2 relatives is the same on each one's tax appraisal, (for example 0.000642), when one relative inherits the property of the other, does her "owner interest" become .001284?

And should that number then be the "decimal interest" on any subsequent division order?

AnswerThanks for asking me to help you with your questions.

1. Is the decimal shown on a division order the same number as the "owner interest" as shown on a tax appraisal? Yes, it should be. But so you will understand why they can sometimes differ, let me explain more. The Operator is required to give a copy of their complete division of interest for a producing well to the tax appraiser's office every year, usually in January. The decimal shown in your division order is supposed to be your decimal share of production revenues you are entitled to, and that decimal should come directly out of the division of interest (a list of all owners in the well, and everyone's decimals added together must equal 1.0000). So if one owner sells all or part of his/her interest during the year, a new division order will be issued at that time for the old & new owners to sign, but the tax appraiser won't find out about it until the following January. This also applies to when an owner passes away, or when ownership decimals change in mid-year for any reason.

2. If two owners each own 0.000642 decimal interest, and one of them inherits all of the decimal from the other, does her "owner interest" become 0.001284? Yes. But again, if the change occurred in the middle of the year, or too late in the year for the division of interest to be updated before being sent to the tax appraiser the following January, then the tax appraiser's records might not reflect the change until a full year later. She can easily get it straightened out, though, by providing to the tax appraisal office a certified copy of whatever document evidences that she has inherited the decimal interest of the other relative. Then make sure she pays the tax bill for each owner account, until the appraiser can update their records.

3. Should that number then be the "decimal interest" on any subsequent division order? Yes, normally it should be. If you have been issued a transfer order or division order that does not show a number equal to both accounts being added together, there might be additional information you need to provide to me that would help me explain why a different number might still be correct, OR explain why a different number definitely is incorrect.

Please let me know if you have any further questions. Good luck!

Marsha

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Comment

I very much appreciate so prompt an answer. I believed that I was correct in thinking "yes" was the answer to my questions, but I was challenged on that by a landman who brushed aside my explanations when I questioned a division order. Thanks again.

Experience

Sr. Staff Division Order Analyst. Certified Division Order Analyst (CDOA, National Association of Division Order Analysts) and Certified Lease Analyst (CPLTA, National Association of Professional Lease and Title Analysts) with 35 years of experience as a combination division order analyst and lease analyst in exploration and production in the oil and gas industry.

OrganizationsNational Assoc. of Division Order Analysts (NADOA), National Association of Division Order Analysts (NALTA), American Association of Professional Landmen (AAPL), American Society of Trainers and Developers (ASTD)